Notice to ASX
2008 Annual Report
Attached is the 2008 Annual Report which contains the full financial statements for
2008.
The notice of the Annual General meeting was posted on the 11 March 2009.
The meeting will be held at the Crowne Plaza Hotel in Port Moresby Papua New
Guinea on the 20th April 2009 at 1.00pm.
The Annual Report and notices of meeting will be posted on the company’s web
site in due course.
PAUL D COLEMAN
Company Secretary
Bougainville Copper Limited
Annual Report
2008
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Incorporated in Papua New Guinea A.R.B.N. 007 497 869
The Company
From 1972 until 1989 when operations were suspended
Bougainville Copper Limited operated a large open pit
mine and processing facility at Panguna on Bougainville
Island in the North Solomons Province of Papua New
Guinea producing copper concentrate containing
significant quantities of gold and silver. On 15 May,
1989 production was brought to a halt by militant activity.
Bougainville Copper on the Web
In the seventeen years prior to 1989, the mine had
produced concentrate containing 3 million tonnes of
copper, 306 tonnes of gold and 784 tonnes of silver. The
production had a value of K5.2 billion, which represented
approximately 44 per cent of Papua New Guinea's
exports over that period. Contributions to the National
Government in the form of taxes, duties and dividends
were approximately 17 per cent of internally generated
Papua New Guinea Government revenue during that
time.
The Annual General Meeting of Bougainville Copper
Limited will be held at 1.00 pm on the 20th day of April,
2009 at the Crowne Plaza Hotel, Hunter Street, Port
Moresby, Papua New Guinea.
Information about Bougainville Copper is available on our
website – www.bougainvillecopper.com.pg – and the
Annual Report and other information may be
downloaded from the site.
Notice of Meeting
A separate Notice of Meeting is enclosed.
All shareholders are cordially invited to attend.
Directors
P R Taylor (Chairman)
R S Burns
A total of K1,088 million was contributed to the National
Government, which represented 62 per cent of the net
cash generated by the project between 1972-1989. In
addition, payments to the North Solomons Provincial
Government and Panguna landowners, together with
provisions made since 1990, amounted to K114 million.
Further, the company's presence in the North Solomons
Province had promoted the development of significant
local business enterprises to provide goods and services
required for the mining operation and for the residents
of the province.
J E Leahy
I J Williams
Mr I J Williams was appointed as a director on 8 May
2008 and continues in office at the date of this report.
Mr B R Alexander was a director from the beginning of
the financial year until his retirement on 8 May 2008.
Secretary
P D Coleman
Company training programs for some 12,000 employees,
including approximately 1,000 completing full trade
apprenticeships and some 400 completing graduate and
post graduate studies, had previously resulted in
considerable progress in the localisation of the company's
employees and also added significantly to the number of
skilled workers elsewhere in the country's work-force. At
the end of 2008, the company had no employees. The
activities of the company are managed on a contracted
services basis by a small team of Rio Tinto Minerals (PNG)
Limited staff based in Port Moresby.
Contents
Financial Statements
14
Since the suspension of mining operations the company
has retained, in good standing, its mine lease and other
leases on Bougainville.
Independent Audit Report
27
Directors’ Declaration
28
Bougainville Copper Limited is owned 53.58 per cent by
Rio Tinto Limited. The Papua New Guinea government
owns 19.06 per cent, while public shareholders hold the
remaining 27.36 per cent of the share capital.
Corporate Information
29
Distribution of the Benefits
31
Statistical Summary
32
1
Introduction
1
The Year in Brief
2
Chairman’s Statement and Year in Review
3
Directors’ Report
6
Resource Statement
8
Corporate Governance Statement
9
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
The Year in Brief
● Preparation for a return to active
Exploration and Mining has
progressed, however access to the
Panguna mine by the company is still
not possible.
● Strengthening kina and weaker share
market contribute to 51 per cent
reduction in investment portfolio to
K107 million, resulting in a decrease
of shareholders’ funds by 27 per cent
to K293 million.
2008
2007
Investment income
(K’000)
9,027
8,966
Operating profit (loss)
(K’000)
(4,786)
3,589
Earnings per share
(toea)
(1.193)
0.895
Shareholders’ funds
(K’000)
293,262
404,034
Return on shareholders’ funds
(per cent)
(1.632)
0.888
2
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Chairman’s Statement & Year in Review
company to be audited in PNG under a World Bank
assistance program for the resources sector. The audit
process took many months to complete and the
company was required to spend considerable money
and management time complying with the audit
process. The matter is ongoing and this year there was a
proposal to alter tax law specifically aimed at
retrospectively applying the amendments to BCL so its
tax appeal would be struck out. The proposal has not
been passed into law. It is a concern to potential
investors that tax rules may be changed on an ad hoc
basis for short term gain to State revenue. It is the type
of message that reduces PNG’s credibility and
attractiveness as a safe and reliable country in which to
invest.
Results
For the year ended 31 December 2008 the net loss was
K4.8 million (AUD$2.3 million) compared with a profit of
K3.6 million (AUD$1.5 million) the previous year. In
addition there was an unrealised K105.9 million capital
loss which together with the net loss equates to a 27.4
per cent decrease in shareholder funds. Operating
expenses in this reporting period were in line with those
of last year. The net loss is largely attributable to project
expenses associated with mine restart studies, tax
dispute legal fees and unfavourable movement in the
Australian dollar against the Kina. The decrease in
shareholder funds is in line with the decline in the
ASX 200.
Dividend Policy
By way of background to the dispute, mining operations
were suspended in 1989 resulting in considerable losses
to the company and these losses continue to mount. In
line with normal practice the company offset those
losses against revenue as well as claiming depreciation
of its remaining mine assets. Despite this approach being
accepted by the IRC every year since the suspension of
mining operations the audit resulted in reassessments
being issued. The basis for the reassessment is the
company has no assets that can be depreciated. (See
note 14 to the financial statements).
Because the company made a net loss it is not in a
position to pay a dividend.
Investment Strategy
Over the past several years BCL has maintained a
strategy of investing its cash in Australian equities. The
move into equities was prompted by a sharp fall in PNG
domestic interest rates and a lack of suitable alternative
investments in PNG. The strong Australian equity market
in the previous several years resulted in a positive return
in Australian dollar terms, much of the unrealised gain
being of a capital nature. The rapid and unexpected
sharp fall in the Australian equities market in line with
global stock markets has wiped out the gains made
since the current investment strategy started. Capital
gains are not currently taxable in PNG and therefore
losses are not deductible. It is intended to continue with
this investment strategy in 2009 because the Board
believes that over time the ASX 200 will recover the
reporting period losses. The company will also continue
to receive a dividend stream which, given the very low
interest rates available for cash, is likely to provide
shareholders with a better return by combining capital
growth with dividend income. The company has
sufficient funds to cover its needs and unlike many other
companies is debt free and therefore not subject to
pressure over loans and re-financing.
BCL has taken expert legal and accounting advice and
on the basis of that advice lodged formal objections to
the amended assessments. The company has paid
approximately K13 million to the IRC which is close to
the claimed unpaid primary tax. By far the largest part of
the claim is for penalties and interest and these claimed
amounts have not been paid and are subject to ongoing
court proceedings. BCL believes that the imposition of
such penalties is unconstitutional, and for BCL to be
liable for the penalties it would have had to avoided tax
deliberately. That certainly was not the case with its
returns being accepted by the IRC in the relevant years.
BCL’s substantive tax appeals against the assessments
and other amounts claimed is waiting a trial date.
In 2008 there were major contests in the Supreme and
National Courts of Papua New Guinea as to the proper
procedures for considering BCL's tax appeals, and
whether or not BCL must pay the contested penalties
and interest before the substantive tax appeals are dealt
with. BCL’s position on proper procedures for hearing
Tax Dispute
Although BCL had been unable to mine at Panguna for
over a decade it was ‘selected’ as the first resources
3
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Chairman’s Statement & Year in Review – continued
the tax appeals has been upheld but its challenge to
immediate payment of the contested penalties and
interest remains undecided.
with the National Government to ensure a transparent
and fair process leading to the transfer of mining powers
to Bougainville. Without a proper process and fair system
scarce investment funds of the magnitude needed for
resource development on Bougainville will be very
difficult to attract.
Review and Renegotiation of the
Bougainville Copper Agreement (BCA)
While there is increasing agreement among a variety of
stakeholders that the Bougainville Copper Agreement
(BCA) and related matters need negotiation it is taking
some time to agree the process and what should be on
the agenda. The lack of progress in the reporting year
was due in part to the need for landowners to settle
their representation at talks and this is linked to the
ongoing reconciliation process. Another issue was the
death of the Autonomous Bougainville Government
(ABG) President, Joseph Kabui. The new President has
now taken office and the company has had talks with
him on issues associated with the Panguna mine. I am
hopeful that President Tanis will renew the call by his
predecessor for a multi party negotiation of the BCA. The
ABG agreed with this approach shortly after being
formed and formally requested that the National
Government expedite a renegotiation of the BCA as a
formal process that would allow the main stakeholders to
address a range of issues. The National Government
agreed to a formal renegotiation of the BCA and that the
Autonomous Government of Bougainville and mine lease
landowners be invited to join the negotiations.
As I said in last year’s report I don’t believe it is necessary
for the ABG to draw down mining powers before either
exploration or mine development can take place within
the company’s tenements. This is because the BCA
already makes provision for such activity. With the
commitment of landowners, the ABG and National
Government progress towards reopening the mine can
move forward and result in much needed economic
development for Bougainville and PNG while allowing
time to develop the remaining minerals sector in an
orderly and considered manner. The current economic
cycle for the minerals industry is in recession so there is
no longer the imperative to rush through a hastily
thought out regime. Greenfield exploration is a high risk
business and will be in decline until the world demand
cycle and available risk capital picks up. It makes better
sense to concentrate on the known resource at Panguna
as a way to fund the Bougainville economy.
Litigation
The company is not a party to the class action litigation
involving a small group of Bougainville plaintiffs in the US
Federal Court. The matter involves allegations over the
way the mine was operated and matters that occured on
Bougainville after mining was suspended. Nonetheless
the litigation does create uncertainty that the company
cannot ignore, it is a distraction from getting on with
rebuilding Bougainville’s economy and a potential
impediment to fund raising for major resource projects
on Bougainville. After more than eight years a majority of
a panel of 11 judges has sent the matter back to where
it started before a single judge. The court has been asked
to decide whether the case should be heard in PNG as a
prerequisite to it being allowed before a US Court. It is
likely to be a long time before the matter is finally
resolved unless the plaintiffs withdraw because there are
still many processes and avenues of appeal available.
I believe a formal multi party process is the best way to
get consensus and a sustainable agreement. Without a
multi party agreement it will be difficult to fund and
execute mine re-development if that is the preferred
outcome.
Bougainville
The World Bank initative aimed at helping Bougainville
develop the capacity to manage its mining sector has
also made slow progress in the past year. Again there
have been issues about the process. Although BCL has its
own National Act under which it can operate it would be
more comfortable about making major investment
decisions related to mine development if the Bougainville
mining regime was settled. While the capacity building
process is progressing the moratorium on new
exploration and mining on Bougainville outside BCL’s
lease area remains. It is hoped that under the leadership
of President Tanis a renewed effort will be made to work
A separate claim against the company concerning
landowner compensation is still pending, however the
plaintiffs in the case have expressed a willingness to bring
4
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Chairman’s Statement & Year in Review – continued
their claims within the Bougainville Copper Agreement
renegotiation process.
If the opportunity arises BCL has identified exploration
targets to be tested. It has also completed a
comprehensive redevelopment study that indicates
potential for an economic operation over 15-20 years.
Further studies will be needed to get to a “bankable”
level of certainty that the mine is economically viable. The
costs associated with those studies are high so they
won’t be undertaken until a rigorous consultation
process with landowners and Government is complete
and there is general agreement on the mine’s future and
the terms under which it can operate.
Corporate Governance
BCL has governance reporting obligations to the
Australian Securities Exchange (ASX) and internally to Rio
Tinto Limited, its parent company. BCL has reported
against ASX governance guidelines. As the name
suggests these are ‘guidelines’ rather than mandatory
rules. A statement on BCL’s compliance with the
guidelines is contained in this report. In addition BCL has
responded to the Rio Tinto Limited governance
questionnaire which incorporates the Group’s
comprehensive range of policy including safety,
environment, financial management and many other risk
management matters.
Our vision to return to active exploration and profitable
mining remains but is dependent on Bougainville
communities reconciling issues and living in harmony.
Normalisation of society and in particular the disposal of
illegal guns is a priority. Ongoing civil unrest and
restrictions to free movement inhibit the ability to govern
and improve the living standards of all citizens.
Safety
The Rio Tinto Group is particularly safety conscious and
has in place a comprehensive set of safety standards to
ensure it provides a safe working environment and that
its employees and contractors comply with best practice
safety procedures. BCL complies with the requirements of
the Rio Tinto safety policy.
BCL is continuing to support the work of the Bougainville
Copper Foundation. This is an independent, “not for
profit”, company that has been funded by BCL since its
inception. This year the Foundation has more than 50
Bougainville students on scholarships. It also provided
text books for the schools in the Panguna area. Many of
the Foundation’s former scholars are working in the
community and contributing to the development of
Bougainville.
Year Ahead
In the year ahead I look forward to working with the
Autonomous Bougainville Government to resolve issues
associated with the mine past and future. I believe a
mutually beneficial agreement can be worked out that
will benefit landowners, the Government and company
shareholders. As I have said before I think it is better to
get the process right than fast track it and fail. I am
pleased at the progress that has been made. Bougainville
has entered a new phase and elected a young and
dynamic person to lead it. I look forward to a period of
increased co-operation and engagement with the
Government and landowners. Together I believe we can
renew the economic prosperity Bougainville once had.
This time it is anticipated there will be greater local
ownership and profit sharing if the mine is redeveloped.
Although the current global economic slowdown
presents challenges for the company and the country,
both are in good financial shape and well placed to take
advantage of the upswing when it arrives. I am optimistic
that strong leadership on Bougainville will drive
redevelopment to the mutual benefit of all.
Peter R Taylor
Chairman & Managing Director.
5 March 2009
5
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Directors’ Report
The Directors of Bougainville Copper Limited present
their report on the audited financial statements of the
company for the year ended 31 December 2008.
member of the National Working Group on Removing
Impediments to Business and Investment in PNG, and
President of the PNG Chamber of Commerce and
Industry.
Review: The operating loss for 2008 of K4.8 million
compared to a profit of K3.6 million in 2007. The global
financial crisis contributed to a 51 per cent reduction in
the investment portfolio to K107 million. Although
income remained steady during the year, operating
expenses increased because of mine redevelopment
planning, additional IRC tax case legal fees and exchange
losses.
Mr. Leahy is currently with Peter Allan Lowing Lawyers
and is a resident of PNG. Appointed a director of
Bougainville Copper Limited February 2007. Due to retire
in April 2009 by rotation.
P R Taylor
Age 62 BA BSc LLB LLM
Formerly with a major Australian law firm. Admitted to
practise law in Papua New Guinea, New South Wales,
Queensland and Western Australia. The last 24 years
have been spent with the Rio Tinto Group. Other Rio Tinto
roles include General Corporate Counsel, Rio Tinto
Exploration General Manager Commercial, Commercial
Advisor to RTZ, General Manager Commercial Business
Development. Appointed to the Board of Bougainville
Copper Limited April 1997 and Managing Director March
2000. Appointed Chairman of Bougainville Copper
Limited in October 2003. Currently Executive Director
Rio Tinto Australia and a Director of several Rio Tinto
Group companies including Rio Tinto Marine and Energy
Resources Australia. Community and business affiliation
include former Chairman of international development
agency Australian Business Volunteers and currently Vice
President of the Australia Papua New Guinea Business
Council.
Directors: The directors of Bougainville Copper Limited
at balance date are:
R S Burns
Age 59 FRMIT (Primary Metallurgy) FAIMM
An employee of the Rio Tinto Group with 29 years
experience in operations and technical roles including
seven years with Bougainville Copper. Other Rio Tinto
roles include Senior Project Manager Resource
Developments, General Manager Wimmera Industrial
Minerals, General Manager Kelian Equatorial Mining,
Managing Director Northparkes/ Peak Mines, General
Manager Improving Performance Together Team,
currently Chief Advisor Technology and Innovation
Melbourne. Chairman Northparkes Mines Joint Venture.
Trustee Aus IMM Educational Endowment Fund.
Appointed a director of Bougainville Copper Limited
January 2006.
I J Williams
Age 71 B Eng (Electrical) FAIMM
J E Leahy
Age 51 B.Juris LLB
Ian Williams has occupied a number of very senior
positions within the mining and processing industries.
Independent Director. Mr. Leahy has university
qualifications in jurisprudence and in law and has been
admitted to practise law in NSW, Australia and Papua
New Guinea. Mr Leahy has more than 19 years
experience in senior tax and management positions in
Papua New Guinea. This experience includes being an
AusAID expert adviser to the Department of Finance,
Assistant Collector of Taxes and the Managing Partner
with both Deloitte Touche Tohmatsu and later
PricewaterhouseCoopers in Papua New Guinea.
He has a degree in Electrical Engineering and is a Fellow
of the Australasian Institute of Mining and Metallurgy
and of the Institution of Engineers. Currently he is Chair
of the Pt Hedland Port Authority, a Director of Brandrill
Limited and a major private structural fabrication
company. He is also assisting the West Australian
Government in the facilitation of a privately funded
major new port and rail infrastructure project in the
state’s Mid West Region. He is also an independent
director on three Aboriginal benefits trusts.
Mr. Leahy is the past Chairman of the Bougainville
Economic Development Task Force, Past President of the
Australia Papua New Guinea Business Council in PNG,
Past President of the Papua Club and is currently a
His diverse experience includes executive management of
open cut and underground mining operations,
6
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Directors’ Report – continued
brownfield expansions and new major mining projects.
He was responsible for the establishment of two iron ore
mines and associated infrastructure for Hamersley Iron Ltd.
Interests Register: There were no transactions
recorded in the Interests Register during the year, other
than the directors’ interests in the shares of the
company as shown above.
Appointed a director of Bougainville Copper Limited in
May 2008.
Auditors: The retiring auditors,
PricewaterhouseCoopers, being eligible, offer
themselves for re-appointment. Details of amounts
paid to the auditors for audit and other services are
shown in Note 2 to the Financial Statements.
Activities: Bougainville Copper Limited has produced
copper concentrate containing gold and silver from a
mine at Panguna, Bougainville, Papua New Guinea, from
1972 until operations were suspended due to militant
activity, in May 1989. The company now derives
investment income. The company has no subsidiaries.
Remuneration of Employees: The company had no
employees during the year. All administrative services
were provided by Rio Tinto Minerals (PNG) Limited on
an at cost basis.
Net Earnings: The net loss of Bougainville Copper
Limited for 2008 was K4.8 million (2007: Profit K3.6
million).
Remuneration of Directors: The amount of directors’
remuneration, including the value of benefits, received
during the year is shown in Note 13 to the Financial
Statements.
Taxation: No future income tax benefits have been
recognised in the accounts.
Share Capital: There was no change in the company's
capital structure during the year.
Donations: The company made no donations during
the year. The company does not make donations to
political parties. The Bougainville Copper Foundation
continues to provide educational and other support.
BCL provides administrative support to the Foundation.
Long Term Loans: The company has no loans and no
lines of credit are in place.
Dividends: The Directors have not declared a dividend
for 2008.
Environment: Mining operations of the company were
suspended in 1989 and it has been denied access to its
mine site to assess environmental circumstances. The
company is not aware of any liability being incurred
under any environmental legislation.
Accounting Policies: There have been no changes made
in the company’s accounting policies during 2008.
Directors’ Interests: Directors’ interests in the share
capital of the company and its related companies as at
5 March 2009 were:
R S Burns
Shares – Rio Tinto Limited
Conditional shares awarded under the
Mining Companies Comparative Plan
– Rio Tinto Limited.
Options – Rio Tinto Share Option Plan
J E Leahy
P R Taylor
Shares – Rio Tinto Limited
Conditional shares awarded under the
Mining Companies Comparative Plan
– Rio Tinto Limited.
Options – Rio Tinto Share Option Plan
I J Williams
Shares – Rio Tinto Limited
Additional Information: The directors also state that:
1. There were no significant changes in the state of
affairs of the company during the year except that,
in September 2008 the Internal Revenue Commission
moved the National Court of PNG for summary
judgment against the company for K42,474,584
being the amount claimed to be outstanding on tax
assessments previously issued by the IRC and which
are the subject of an appeal by the company. The
company simultaneously moved the court for orders
that the proceedings seeking that judgment to be
stayed pending the determination of the appeal by
the company. At the time of writing no decision has
been delivered. The current claim of K42,474,584
represents K15,725,529 primary tax and the balance
penalties and interest.
1,012
4,812
4,590
No interests
4,166
7,968
18,162
3,000
In November 2008 the National Parliament presented
7
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Directors’ Report – continued
its annual budget legislation which included a
provision with the intended effect that if the
company did not pay the total amount claimed to be
outstanding on the disputed tax assessments by the
end of January 2009 then the pending court appeals
by the company would stand dismissed. It is believed
the budget legislation passed by Parliament up to the
date of this report did not contain this provision.
since the end thereof; no shares of the company
were issued during the year or have been issued
since the end thereof by virtue of the exercise of any
option granted by the company; and no options over
shares of the company are outstanding at the date
of this report.
Signed this 5th day of March 2009 in accordance with
a resolution of the directors of Bougainville Copper
Limited.
In the event the court rules against the company or
legislation is passed requiring payment, the Company
will face a substantial drain on its liquid assets.
2. The results of the company during the financial year
have not been, in the opinion of the directors,
substantially affected by events of a material and
unusual nature other than contained in this report,
and as set out in the Notes to the accounts.
P R Taylor
Chairman and Managing Director
Resource Statement
3. Except as reported in this Annual Report, there were
no matters or circumstances that have arisen since
the end of the financial year and which significantly
affected or may significantly affect:
(i)
the operations of the company
(ii)
the results of those operations or
J E Leahy
Director
In 2008 BCL prepared an Order of Magnitude Study
(OMS) to evaluate the technical and financial viability of
re-opening the Panguna mine. As part of the OMS a
JORC compliant mineral resource estimate was
completed. The 2008 mineral resource has been
estimated using geological, mine planning and
production data archived in 1989. The archived data
sets have been reviewed and validated by Rio Tinto and
ex BCL staff during 2008. No additional data was
collected as part of the OMS.
(iii) the state of affairs of the company in the
financial year subsequent to 31 December 2008.
4. No director has an interest in any contract or
proposed contract with the company, nor is any
director party to any material contract involving
directors' interests, and are not in receipt of any
loans or benefits other than the aggregate amount
of emoluments received or due and receivable by
directors shown in the accounts and the amount of
fixed salary derived from the company or from a
related corporation.
The updated estimate confirms the significant size of
the Panguna resource of over one billion tonnes of
material containing 3.5 million tonnes of copper and
12.7 million ounces (395 tonnes) of gold.
Tonnes (M)
5. No options over shares of the company have been
granted by the company during the financial year or
8
Cu (%) Au (g/t) Cu (Mt) Au (Moz)
Measured Resource
0
0.00
0.00
0
0
Indicated Resource
1000
0.33
0.37
3.3
11.9
Inferred Resource
64
0.28
0.41
0.2
0.8
Total Resource
1064
0.33
0.37
3.5
12.7
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Corporate Governance Statement
For the financial year ended 31 December 2008
and defines the division of responsibility between Board
and management by formal delegation and a system of
Board reserve powers. The Board reviews the Board
Charter on an annual basis, and a copy is available on the
company’s website at: www.bougainvillecopper.com.pg
Corporate governance
The Board of BCL considers high standards of corporate
governance to be critical to business integrity and
performance and to maximising the overall long term
return to shareholders. The Board seeks to ensure that
BCL meets the objectives of its shareholders, while
paying proper regard to the interests of all stakeholders.
The corporate governance structures and practices in
place at BCL are substantially in compliance with the 2nd
Edition of the Corporate Governance Principles and
Recommendations (“Principles”) developed by the
Australian Securities Exchange Corporate Governance
Council (“ASX Principles”).
The Directors approve strategy and business plans and
monitor the performance of the company against these
plans. The Directors also monitor compliance with
policies prescribed by the Board in areas such as health
and safety, environment, business ethics, internal control
and risk management. These policies are designed to
ensure that BCL complies with the regulatory
requirements governing its operations.
The Board has considered the ASX Principles, and BCL
does not comply with the following recommendations:
Composition
The Board of BCL currently consists of four directors,
three of whom are non-executive. The Chairman is
Mr. P Taylor who is also Managing Director and an
executive of Rio Tinto. A non-executive director,
Mr. R Burns, is also an executive of Rio Tinto. Mr. J Leahy
and Mr. I Williams are independent non-executive
directors.
Recommendations 2.1, 2.2 and 2.3 –
There is not a majority of independent Directors nor
an independent Chairman, and the roles of Managing
Director and Chairman are held by the same person;
Recommendation 2.4 –
There is no established nominations committee; and
Recommendation 4.2 –
There are only two members on the Audit Committee;
and
Details of the Directors, their experience, qualifications
and other appointments are set out on page 7.
Qualification for Board membership is related to the mix
of skills and knowledge that the Board considers will best
serve the interests of BCL and all of its shareholders.
Decisions relating to appointment of Directors are made
by the full Board. Directors appointed by the Board are
required by BCL’s constitution to submit themselves for
election by shareholders at the Annual General Meeting
following their appointment. Non-executive directors are
subject to retirement by rotation at least every three years
in accordance with BCL’s constitution, but may offer
themselves for re-election. There is no share ownership
qualification for appointment as a director.
Recommendation 8.1 –
There is no remuneration committee.
Areas where the corporate governance practices in place
at BCL do not follow the recommendations set out in the
ASX Principles arise due to Rio Tinto’s ownership of
53.58 per cent of the shares of the company and the
management direction, services and support provided by
Rio Tinto. As explained further below, the Board
considers that in each case this is appropriate.
The Corporate Governance section of the company’s
website sets out the further information required by the
ASX Principles at www.bougainvillecopper.com.pg
The Board has not established a nominations committee.
The Board recognises that this is not compliant with
Recommendation 2.4 of the ASX Principles. The Board
considers that its existing practices in reviewing director
competencies, Board succession planning, Board
performance evaluation and director selection and
nomination, carried out in accordance with the Board
Charter, are satisfactory and are appropriate given the
size of the Board and the company’s current ownership
structure.
The Board
Responsibilities & Charter
In carrying out its responsibilities and powers, the Board
at all times recognises its overriding responsibility to act
honestly, fairly, diligently and in accordance with the law
in serving the interests of the company’s shareholders
and all other stakeholders.
The Board Charter underpins the strategic guidance and
effective management oversight provided by the Board,
9
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Corporate Governance Statement – continued
Independence
judgment to bear on Board decisions and act in
accordance with their statutory duties of good faith and
proper purpose, and in the interests of all shareholders.
Mr J Leahy and Mr. I Williams are independent nonexecutive directors.
All related party transactions, including those with
Rio Tinto, have been determined by the independent
directors to be in the interests of BCL.
For the purposes of determining director independence,
the Board considers any material business relationship
which could interfere, or be perceived to interfere, with
the director’s independence and judgement, ability to
provide a strong, valuable contribution to the Board’s
deliberations and director’s ability to act in the best
interest of the company and all shareholders. Contracts
in the ordinary course of business that exist between BCL
and a company in which a director has declared an
interest, are reviewed for materiality to both BCL and the
other party to the contract.
Chairman and Managing Director
The respective roles of Chairman and Managing Director
have been codified with authority levels set for each
position to ensure the combined roles do not result in
unfettered power being held by a single member of the
Board. Mr Taylor’s performance as the company’s
Managing Director was reviewed during 2008 by
Rio Tinto Limited in keeping with its executive
management practices (recommendation 1.2). Whilst this
may not be compliant with Recommendation 2.2 of the
ASX Principles, the Board considers that Mr Taylor’s
appointment is appropriate recognising Rio Tinto’s
53.58 per cent shareholding.
The following may be taken into account in considering
such material business relationships:
-
whether within the last 5 years the director or a close
family member has been part of the executive
management of the company, employed in a senior
position with a member of the Rio Tinto Group or has
received additional remuneration from the company
or a member of the Rio Tinto Group;
At this juncture, none of the recommendations of the
ASX Principle 2 are in place, except Principle 2.5
“evaluating the performance of the board, its
committees and individual directors”. The situation will
continue to be monitored/reviewed over the coming year
with appropriate actions implemented where
operationally desirable and strategically appropriate prior
to December 2009.
-
whether the director or a close family member is, or is
associated with, a substantial shareholder (more than
5 per cent of the voting shares) in the company or in
a member of the Rio Tinto Group;
-
the director’s cross directorships or significant links
with or involvement in other companies;
-
the director’s length of service on the Board; and
Board Meetings
-
whether within the last three years the director or a
close family member has had, either directly or
indirectly and whether as principal, employee or
consultant, a material business relationship with the
company or with a member of the Rio Tinto Group,
whether as an auditor, professional adviser, supplier,
or customer (“material” being more than 2 per cent
of the company’s or the counterparty’s consolidated
gross revenue per annum).
The Board held four scheduled meetings during 2008,
and did not meet for any unscheduled meetings. The
Board meeting attendance details for Directors in 2008
are set out below.
Meetings
Meetings
Director
Attended
Whilst in Office
2
B Alexander
2
4
4
R Burns
4
4
J Leahy
P Taylor
4
4
The Board does not comprise a majority of independent
directors although half its directors are independent. This
is not in compliance with Recommendation 2.1 of the
ASX Principles. The composition of the Board recognises
Rio Tinto’s 53.58 per cent shareholding and the Board
considers that given the company’s operating status for
the past year, it has not been considered necessary to
have more than four Directors.
I Williams
2
2
Performance Self-Assessment
In 2008 the Board performed an annual evaluation of
itself that:
(a) Considered the performance of the directors and the
Board and the adequacy of the Board's structures and
processes, including the Board Charter;
All Directors are required to, and do, bring independent
10
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Corporate Governance Statement – continued
this is not compliant with Recommendation 8.1 of the
ASX Principles. The Board considers that its existing
practices in reviewing and approving remuneration
arrangements, carried out in accordance with the Board
Charter, are satisfactory and are appropriate given the
size of the Board and the ownership by the Rio Tinto
Group of 53.58 per cent of the shares of the company
and the support provided by Rio Tinto with respect to
remuneration policies and procedures.
(b) Set out goals and objectives of the Board for the
upcoming year; and
(c) Considered whether any improvements or changes to
the Board structures and processes, including the
Board Charter and Audit Committee and Charter,
were necessary or desirable.
The process of evaluation and self assessment took the
form of a questionnaire completed by each of the
directors. Following collation, the results and the
adequacy and appropriateness of the self assessment
process were considered and discussed by the directors at
the next Board meeting, and actions arising were agreed.
The maximum limit for Directors’ remuneration is
determined by shareholders in a General Meeting.
Within that limit the remuneration of Directors is
generally determined by the full Board after taking into
account data on market remuneration levels. During
2008 there was no increase in individual director fees of
$30,000 plus $6,000 per annum for Committee
members, however the Board approved an increase in
directors fees to A$55,000 and A$10,000 per annum for
Committee members subject to approval at the AGM of
the increase in the fee-pool. One independent director
retired and received a retirement benefit which was fully
provisioned. No other directors are entitled to retirement
benefits. It is proposed to remove the ability to pay
retirement benefits this year which is compliant with
Recommendation 8.2 of the ASX Principles. The
Managing Director does not receive directors’ fees. Mr.
Burns directors’ fees are paid directly to Rio Tinto Limited.
Independent Professional Advice
The Board has adopted a procedure for directors wishing
to seek independent professional advice at the company’s
expense, in the furtherance of their duties. The Board
recognises that there may be circumstances in which
individual directors are entitled to independent
professional advice at the company’s expense, in the
furtherance of their duties, and any director may do so
by arrangement with the company secretary.
Particulars of Directors’ Interests in Shares
and Options
The particulars of the directors’ interests in shares in the
company and related bodies corporate as at
31 December 2008 are set out on page 8.
Audit Committee
Each of the directors has given a general notice in
accordance with PNG corporations law (and consistent
with the Australian Corporations Act 2001) stating that
he is an officer and/or member of certain specified
corporations and, as such, is to be regarded as having an
interest in any contract which may be made between
BCL and those corporations.
The Audit Committee is appointed by the Board and
comprises the two non-executive Directors. Two Directors
constitute a quorum. The present members of the Audit
Committee are Mr J Leahy (Chairman) and Mr. I Williams.
The company secretary and external auditors are available
to attend meetings. The Board recognises that this
membership level is not compliant with Recommendation
4.2 of the ASX Principles. The Board considers that given
its current size having both independent Directors on the
Committee is adequate.
Remuneration
BCL does not have any employees and consequently
does not have need for a Remuneration Committee.
Management of BCL is provided by Rio Tinto Limited
under a Service Agreement. Rio Tinto Limited selects and
appoints staff consistent with the business needs of BCL
and the Board reviews these appointments. Some of
these individuals work partly for BCL and partly for the
Rio Tinto Group. The remuneration of executives and
staff appointed to BCL is governed by the compensation
policies applied by Rio Tinto Limited and which are
discussed in its Annual Report. The Board recognises that
The Audit Committee Charter sets out the role and terms
of reference of the Audit Committee and is reviewed
regularly. The Audit Committee Charter is available at the
Corporate Governance section on BCL’s website.
The Committee provides a formal structure for reviewing
BCL’s financial statements, accounting policies, control
systems, risk management practices and taxation issues,
and for liaison with the external and internal auditors.
The Committee also reviews the adequacy of internal
11
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Corporate Governance Statement – continued
Corporate Governance section of the Rio Tinto website
at: www.riotinto.com
and external audit arrangements.
The Committee advises the Board of any matters that
might have a significant impact on the financial condition
of BCL and has the authority to investigate any matters
within the terms of reference, having full access to the
information and resources of BCL to fulfil its function.
Related party transactions are considered by the Audit
Committee including, where they relate to Rio Tinto. The
Committee reviews compliance with the Corporations
Act, and the requirements of the Australian Securities
Exchange and other regulatory requirements.
The “Rules for dealing” apply to the participation of BCL
executives in the Rio Tinto long term incentive plans
involving the awarding of Rio Tinto securities at a future
date, and any such grants of shares and options under
the Rio Tinto plans are subject to and conditional upon
compliance with the terms of the Rules for dealing,
including an express prohibition on hedging or limiting of
exposure to economic risk in relation to such securities.
The Chairman requires that for all dealing in BCL
securities:
The Audit Committee held four scheduled meetings
during 2008, and attendance details of the 2008
meetings of the Audit Committee are set out in the table
below. The names and qualifications of the members, are
set out in the Directors’ Report on page 7.
Meetings
Meetings
Director
Attended
Whilst in Office
B Alexander
2
2
J Leahy (Chairman)
4
4
I Williams
2
- Directors must advise the Chairman in writing, and
receive approval in writing from the Chairman, if they
intend to purchase or sell securities in the company. In
regard to his own dealings, the Chairman is required
to notify the Chairman of the Audit Committee; and
- No dealings in securities of the company may take
place for the period from the end of any relevant
financial period to the trading day following
announcement of BCL’s annual results or half year
results.
2
Any work to be conducted by the external auditor other
than the statutory audit is approved by the Audit
Committee.
Risk Identification and Management
BCL has in place a range of policies and procedures to
manage the risks associated with its operating activities.
These policies and procedures have been adopted by the
Board, with primary oversight by the Audit Committee,
to ensure that potential business risks are identified and
appropriate action taken.
Code of Business Conduct
BCL has adopted the Rio Tinto Code of Conduct, The
way we work, available at Rio Tinto’s website at:
www.riotinto.com The company’s consultants and
contractors are required to comply with this. All
employees and contractors are required to maintain high
standards of ethical behaviour in the execution of their
duties and comply with all applicable laws and
regulations in Papua New Guinea and in every other
country in which the company engages in business.
The management of risk is an integral part of the
responsibility of both the Board and management and is
carried out through an integrated risk management
assurance process including a detailed internal control
questionnaire process covering all of the Company’s
material business risks.
The way we work is reviewed regularly to ensure
compliance by the company.
BCL benefits from the Rio Tinto Group's knowledge,
policies and practices on risk management and corporate
assurance developed to manage its diverse business
activities covering a variety of commodities and
operational locations.
The company utilises Rio Tinto’s confidential
whistleblower program known as ‘Speak-Out’.
Employees are encouraged to report any suspicion of
unethical or illegal practices.
Purchase and Sale of Company Securities
Key material business risks and opportunities inherent to
the Company's operations and the mining industry
include (but are not necessarily limited to): economic
conditions (and consequent fluctuations in commodity
pricing, exchange rates and costs of finance); delivery of
exploration and development projects; ore reserve
BCL has adopted the Rules for dealing in securities of
Rio Tinto, its subsidiary and associated companies’
(“Rules for dealing”) which reinforces to all directors,
officers and employees the prohibition against insider
trading. The share trading policy is available at the
12
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Corporate Governance Statement – continued
estimates; community relationships and government
regulation; land and resource tenure; rehabilitation
including impacts of climatic conditions, and costs of
operations including changes to input costs.
internal control questionnaire process, that BCL’s internal
compliance and control system is in place and operating
effectively in all material respects.
Public Statements and Disclosure Matters
The Board has in place a number of systems to identify
and manage business risks. These include:
BCL makes full and immediate disclosure of material
information to its shareholders and the market in
accordance with its obligations. Established reporting
systems are in place to ensure compliance.
• The identification and review of all of the business
risks facing the company. The risk assessment is
completed by management and reviewed by the audit
committee on an annual basis. Management is
required to report on assessments twice a year and
provide a certificate of compliance to Board annually;
Shareholder Communication
BCL recognises the importance of effective
communication with shareholders and the general
investment community. Apart from BCL’s compliance with
its continuous disclosure obligations, BCL takes steps to
ensure that its shareholders and other stakeholders are
kept informed.
• The provision of reports and information by
management to the Board, on a periodic basis,
confirming the status and effectiveness of the plans,
controls, policies and procedures implemented to
manage business risks;
Full advantage is taken of the annual general meeting to
inform shareholders of current developments and to give
shareholders the opportunity to ask questions. As
recommended by the ASX Principles, BCL’s auditor
PricewaterhouseCoopers, attends the Annual General
Meeting and is available to answer shareholder questions
about the conduct of the audit and the preparation and
content of the auditor’s report. BCL shareholders are also
able to submit written questions regarding the statutory
audit report to the auditors via the Company. Any
questions received and answers provided will be made
available to members at BCL Annual General Meetings.
• Guidelines for ensuring that capital expenditure and
revenue commitments exceeding certain approved
limits are placed before the Board for approval;
• Limits and controls for all financial exposures;
• A regulatory compliance program; and
• Safety, health and environmental policies which are
supported by a set of standards and management
systems which recognise the company’s commitment
to achieving high standards of performance in all its
activities in these areas.
The directors consider that the 2008 Annual Report and
financial statements present a true and fair view and
have been prepared in accordance with applicable
accounting standards, using the most appropriate
accounting policies for BCL’s business and supported by
reasonable and prudent judgements and estimates. The
directors have received a written statement from the
managing director and company secretary to this effect.
In accordance with ASX principle 7.3 this written
statement relies on a sound system of risk management
and internal compliance and confirms that BCL’s risk
management and internal compliance and control
systems are operating efficiently and effectively in all
material respects. The directors and managers who are
required to exercise judgement in the course of the
preparation of the financial statements are required to
conduct themselves with integrity and honesty and in
accordance with ethical standards of their profession
and/or business There is further formal certification given
by the Managing Director, as part of the Company’s
Information about Bougainville Copper is available on our
website – www.bougainvillecopper.com.pg
13
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Income Statement
Bougainville Copper Limited year ended 31 December 2008
Notes
2008
K’000
2007
K’000
974
8,053
9,027
938
631
7,397
8,966
(9,176)
(4,637)
(13,813)
(4,858)
(519)
(5,377)
(4,786)
-
3,589
-
(4,786)
3,589
(1.19)
0.895
Income
Interest
Exchange gains
Dividends
Costs and expenses
General and administration expenses
Exchange losses
2
5
Operating profit (loss) before tax
Income tax
4
Operating profit (loss) after tax
Basic and diluted earnings per share (toea)
Statement of Changes in Equity
Paid up
capital
K’000
Asset
revaluation
reserve
K’000
Fair
value
reserve
K’000
Accumulated
losses
Total
K’000
K’000
Brought forward at 01.01.07
Operating profit – 2007
Fair value movements – 2007
401,063
-
31,276
-
64,654
22,205
(118,753)
3,589
-
378,240
3,589
22,205
Balance at 31.12.07
Operating (loss) – 2008
Fair value movements – 2008
Balance at 31.12.08
401,063
401,063
31,276
31,276
86,859
(105,986)
(19,127)
(115,164)
(4,786)
(119,950)
404,034
(4,786)
(105,986)
(293,262)
All amounts are expressed in Papua New Guinea kina. Rounding to the nearest thousand kina has been adopted.
The Notes on pages 17 to 26 form part of these accounts and are to be read in conjunction with them.
14
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Balance Sheet
Bougainville Copper Limited at 31 December 2008
Notes
2008
K’000
2007
K’000
Funds employed:
Shareholders' Funds
Ordinary shares
Asset revaluation reserve
Fair value reserve
Accumulated losses
11
9
12
401,063
31,276
(19,127)
(119,950)
293,262
401,063
31,276
86,859
(115,164)
404,034
6(b)
6(b)
4(b)
22,073
4,517
6,759
33,349
22,073
4,736
6,759
33,568
6(a)
1,142
1,137
327,753
438,739
98,753
3,909
197,894
300,556
204,739
3,909
197,894
406,542
968
8,704
17,525
27,197
358
14,291
17,548
32,197
327,753
438,739
Non-Current Liabilities
Provisions
Other payables
Income tax
Current Liabilities
Trade payables
Total Funds
These funds are represented by:
Non-Current Assets
Available-for-sale financial assets
Other receivables
Mine assets
3
10(b)
8
Current Assets
Cash and cash equivalents
Held-to-maturity financial assets
Other receivables
7
10(a)
Total Assets
Details of contingent liabilities and assets are shown in Note 14. All amounts are expressed in Papua New Guinea kina. Rounding to the nearest
thousand kina has been adopted. The Notes on pages 17 to 26 form part of these accounts and are to be read in conjunction with them.
15
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Statement of Cash Flows
Bougainville Copper Limited year ended 31 December 2008
2008
K’000
2007
K’000
(10,163)
979
8,053
(1,131)
(5,731)
889
7,397
2,555
(979)
3,126
2,147
(5,914)
(889)
3,355
(3,448)
1,016
358
(406)
(893)
1,352
(101)
968
358
Cash flows from operating activities
Payments to suppliers
Interest received
Dividends received
Net operating cash flows
Cash flows from investing activities
Payments for purchase of shares in non-related entities
Increment in held-to-maturity investments
Proceeds from held-to-maturity investments
Net investing cash flows
Net increase/(decrease) in cash and cash equivalents
Net cash flow
Cash and cash equivalents at beginning of year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
All amounts are expressed in Papua New Guinea kina. Rounding to the nearest thousand kina has been adopted. The Notes on pages 17 to 26
form part of these accounts and are to be read in conjunction with them.
For, and on behalf of, the board.
P R Taylor
J E Leahy
Chairman & Managing Director
Director
5 March 2009
16
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Notes to Accounts
These notes form part of the 2008 accounts of Bougainville Copper Limited and should be read in conjunction with them.
The principal accounting policies applied in the
preparation of these financial statements are set out
below. Accounting policies relevant to mining operations
are not presented due to mining operations having
ceased in 1989. These policies have been consistently
applied to all years presented, unless otherwise stated.
addition to the current requirement to present balance
sheets at the end of the current period and comparative
period. The Company will apply IAS 1 (Revised) from 1
January 2009. It is likely that both the income statement
and statement of comprehensive income will be
presented as performance statements.
1.(a) Basis of Preparation
1.(b) Accounting Policies
Mine Assets:
The financial statements of Bougainville Copper Limited
have been prepared in accordance with International
Financial Reporting Standards (IFRS) and the PNG
Companies Act 1997. The financial statements have been
prepared under the historical cost convention, as modified
by revaluation of available-for-sale financial assets.
As a consequence of cessation of mining activities in
1989, an impairment loss of K350 million was made for
deterioration, damage or pilferage of company assets on
Bougainville. The accuracy of that provision cannot be
proved because the lack of access to Bougainville
prevents a detailed assessment of the nature or extent of
those losses. No depreciation charge or increase to the
impairment loss has been made since 1991. The Directors
consider that any further review of the impairment loss at
this time would be completely arbitrary because of the
continuing lack of access to the mine.
The preparation of financial statements in conformity
with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its
judgment in the process of applying the Company’s
accounting policies. The areas involving a higher degree
of judgment or complexity, or areas where assumptions
and estimates are significant to the financial statements,
are disclosed in the accounting policy note on significant
risks and uncertainties.
Taxation:
Tax effect accounting procedures are followed. Any
current liability for income tax is based on estimated
taxable income for the year. The components of this
taxable income can differ from those which make up the
earnings before tax for the year and these differences are
either permanent differences or temporary differences.
Permanent differences are disclosed in Note 4. Temporary
differences arise because the tax base of some assets and
liabilities is different from their accounts carrying value.
The tax effect of these temporary differences is classified
as either deferred income tax liability or future income
tax benefit in the balance sheet. Future income tax
benefits are not recognised unless their realisation is
probable. Future income tax benefits therefore have not
been recognised pending the development of a clearer
view of the timing of recommencement of operations.
Standards, amendments and interpretations to existing
standards that are not yet effective and have not been
early adopted by the Company.
The following amendments to an existing standard have
been published and are mandatory for the Company’s
accounting periods beginning on or after 1 January 2009
or later periods, but the Company has not early adopted
them:
IAS 1 (Revised), ‘Presentation of financial statements’
(effective from 1 January 2009).
The revised standard will prohibit the presentation of
items of income and expenses (that is, ‘non-owner
changes in equity’) in the statement of changes in equity,
requiring ‘non-owner changes in equity’ to be presented
separately from owner changes in equity. All non-owner
changes in equity will be required to be shown in a
performance statement, but entities can choose whether
to present one performance statement (the statement of
comprehensive income) or two statements (the income
statement and statement of comprehensive income).
Where entities restate or reclassify comparative
information, they will be required to present a restated
balance sheet as at the beginning comparative period in
Foreign Currency Translation:
(i) Functional and presentation currency
Items included in the financial statements of the
company are measured using the currency of the primary
economic environment in which the entity operates (“the
functional currency”). The financial statements are
presented in PNG Kina, which is the company’s functional
and presentation currency.
17
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
reference to the Australian Securities Exchange quoted
market bid prices at the close of business on the balance
sheet date.
(ii) Transactions and balances
Foreign currency transactions are translated into
functional currency using the exchange rates prevailing at
the dates of transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions
and translation at year end exchange rates of monetary
assets and liabilities determined in foreign currencies are
recognised in the income statement.
(ii) Held-to-maturity financial assets
Held-to-maturity investments are non-derivative financial
assets with fixed or determinable payments and fixed
maturities that the Company’s management has the
positive intention and ability to hold to maturity. These
are measured at cost with accrued interest included in
other receivables.
Provisions:
Provisions for compensation, rehabilitation and
stabilisation are recognised when the company has a
present legal or constructive obligation as a result of past
events; it is more likely than not that an outflow of
resources will be required to settle the obligation; and
the amount has been reliably estimated. Provisions are
not recognised for future operating losses.
Cash and Cash Equivalents:
Cash and cash equivalents comprises cash on hand,
deposits held at call with banks, and bank deposits and
treasury bills with original maturities of three months or
less.
Revenue Recognition:
Investments:
Interest income is recognised on a time-proportion basis
using the effective interest method.
(i) Available-for-sale financial assets
Investments in marketable securities (shares in other
corporations) are classified as “available-for-sale financial
assets”. Investments intended to be held for an indefinite
period of time, which may be sold in response to needs
for liquidity or changes in interest rates, are classified as
available-for-sale; these are included in non-current assets
unless management has the express intention of holding
the investments for less than 12 months from the
balance sheet date or unless they will need to be sold to
raise operating capital, in which case they are included in
current assets. Management determines the appropriate
classification of its investments at the time of the
purchase and re-evaluates such designation on a regular
basis.
Dividend income is recognised when the right to receive
payment is established.
1.(c) Critical Accounting Estimates and
Assumptions
(i) Carrying Value of Mine Assets
Mine production was suspended on 15 May 1989
because of attacks on employees. Following repeated
instances of damage to mine facilities and the power line
and further attacks on employees, it became necessary to
evacuate all remaining company personnel from
Bougainville early in 1990.
There continues to be uncertainty surrounding the future
of the Panguna mine. Since the withdrawal of company
personnel from Bougainville was completed on 24 March
1990, there has been no care and maintenance of the
company's assets. Considerable deterioration of the
assets has occurred in the intervening period, because of
this lack of care and maintenance, their exposure to the
elements, vandalism, pilferage and militant action.
However, as access to the mine site has not been
possible, the extent of the necessary write-downs is not
capable of reliable measurement or estimation.
All purchases and sales of investments are recognised on
the trade date, which is the date that the company
commits to purchase or sell the asset. Cost of purchase
includes transaction costs. Available-for-sale investments
are subsequently carried at fair value. Gains or losses on
available-for-sale investments are recognised as a
separate component of equity until the investment is
sold, or until the investment is determined to be
impaired, at which time the cumulative gain or loss
previously reported in equity is included in the income
statement. For investments that are actively traded in
organised financial markets, fair value is determined by
With the passage of time, it is clear that a major writedown of assets from their pre-closure levels will be
required. To allow for this future write-down, the
18
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
directors made a impairment loss in 1991 for
deterioration, damage and pilferage of K350 million,
with this sum being classified as an extraordinary item.
determining when an available-for-sale financial asset is
impaired. This determination requires significant
judgment. In making this judgment, the Company
evaluates, among other factors, the duration and extent
to which the fair value of an investment is less than its
cost.
The exact quantum of this provision should not be
viewed as a precise calculation reflecting an accurate
estimate of the present value of losses or likely costs of
repair. Rather, the reduction in carrying value should be
seen as a broad estimate of the total service potential
likely to have been lost to the operation in respect of the
whole inventory of assets carried in the books.
The Company has determined the shortfall of each
investments fair value below cost to be neither significant
nor prolonged at 31 December 2008.
If the decline in fair value below costs was considered
significant or prolonged, the Company would have
suffered an additional loss of K19,126,681 in its 2008
financial statements, being the transfer of the
accumulated fair value adjustments recognised in equity
on the impaired available-for-sale financial assets to the
income statement.
While directors have made this provision in good faith
based on the limited information available to them, it
must be recognised that the actual extent of the
necessary write-downs can only be established when
access to the mine site by appropriate company
representatives is again possible. Accordingly, the 1991
provision may eventually prove to be above or below the
sum that is necessary to reflect these losses. The directors
believe that in the absence of reliable information and
the lack of a more suitable alternative, this is the only
appropriate basis to use.
1(e) Rounding of Amounts
All amounts have been rounded off to the nearest K’000,
unless otherwise stated.
1(f) Capital Risk Management
The Company’s objectives when managing capital are to
safeguard the Company’s ability to continue as a going
concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. In
order to maintain or adjust the capital structure, the
company may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
(ii) Income Taxes
Refer to Note 10 and 14 for information regarding the
company’s ongoing tax dispute with the IRC.
1(d) Critical judgment in applying the
entities accounting policy
Impairment of available-for-sale financial assets
The Company follows the guidance of IAS 39 Financial
Instruments: Recognition and Measurement on
19
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Bougainville Copper Limited year ended 31 December 2008
2008
K’000
2007
K’000
2,069
60
128
-
1,358
32
79
2
160
3,242
1,376
85
143
326
1,587
9,176
187
2,084
127
50
121
279
539
4,858
2. General and administrative expenses
Remuneration of Directors (Note 13)
Auditors’ remuneration
- auditing the accounts
- taxation services
- other
(The auditors have received no other benefits)
Insurance
Management fees – related party (Note 18)
Legal Fees – IRC tax case
Mining Lease Rents
Corporate Subscriptions
Goods and Services Tax
Other general and administrative expenses
3. Available-for-sale financial assets
Non-current
At fair value
Opening balance
Movement in Fair Value Reserve
Additions to Available-For-Sale Financial Assets
Closing balance
204,739
(105,986)
98,753
176,620
22,205
5,914
204,739
Original cost when purchased
117,880
111,966
Fair Value Reserve year end balance
Additions to Available-For-Sale Financial Assets
(19,127)
-
86,859
5,914
98,753
204,739
Closing Balance
Available-for-sale financial assets consist of investments in ordinary shares, and therefore have no fixed maturity date
or coupon rate.
4. Taxation
(a) The following reconciliation discloses the items which caused the charge for
income tax in the income statement to vary from the income tax prima facie
payable on reported earnings:
Operating profit (loss) before taxation
Prima facie income tax @ 30 per cent
Future tax benefit now recognised
Income tax expense
(4,786)
(1,436)
1,436
-
3,589
1,077
(1,077)
-
(b) An agreement between the Independent State of Papua New Guinea and Rio Tinto Limited provides for the
deferral of income tax payable in respect of the 1989 year until certain criteria have been met following
successful recommencement of operations.
(c) The future income tax benefit relating to tax losses has not been brought to account because their realisation is
not probable.
Available tax losses carried forward amount to K105,192,315 (2007: K104,038,253).
20
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Bougainville Copper Limited year ended 31 December 2008
2008
K’000
2007
K’000
(4,637)
(519)
5. Exchange Fluctuation
(a) The net exchange gain/(loss) reflected in earnings arose
from overseas held-to-maturity financial assets
(b) Foreign currency amounts included in current assets, non-current assets,
current liabilities and non-current liabilities that are not effectively hedged are:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Kina equivalent of Australian dollars
9,672
98,753
111
-
14,533
204,739
37
219
830
312
1,142
830
39
268
1,137
4,517
4,736
22,073
22,073
14,291
930
(7,279)
4,202
(3,440)
8,704
16,025
856
(6,468)
3,145
733
14,291
6. Liabilities
Trade payables
(a) Current
Provision for care and maintenance
Trade creditors
Related corporations (Note 18)
(b) Non-current
Other payables
Payables that have been carried forward since the suspension of mining operations have been
classified as non-current liabilities, as the directors consider they are unlikely to be settled within
the following year.
Aged trade payables that are no longer considered payable have been written back.
Provision for compensation, rehabilitation and stabilisation
The company has a provision for compensation, rehabilitation and
stabilisation for which it may be liable as a consequence of cessation of
operations. The directors consider that the provision held of K22.07 million is
adequate to cover claims for which the company may be liable.
7. Held-to-Maturity Financial Assets
Opening balance
Interest received
Transfers from held-to maturity financial assets
Additions to held-to-maturity financial assets
Exchange gains/(losses)
Closing balance
21
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Bougainville Copper Limited year ended 31 December 2008
2008
K’000
2007
K’000
292,165
159,721
132,444
102,988
38,664
64,324
196,768
292,165
159,721
132,444
102,988
38,664
64,324
196,768
245,177
148,866
96,311
304,486
104,703
199,783
296,094
245,177
148,866
96,311
304,486
104,703
199,783
296,094
62,121
46,204
15,917
62,121
46,204
15,917
29,112
29,112
1,036,049
498,158
537,891
10,003
547,894
350,000
197,894
1,036,049
498,158
537,891
10,003
547,894
350,000
197,894
197,894
197,894
197,894
197,894
8. Mine Assets
(a) Mine development and buildings
- at directors’ 1980 valuation
- Less accumulated depreciation
- at cost
Less accumulated depreciation
Net mine development and buildings
(b) Plant, machinery & equipment
- at directors’ 1980 valuation
- Less accumulated depreciation
- at cost
Less accumulated depreciation
Net plant, machinery & equipment
(c) Mine property
- at cost
Less accumulated amortisation
Net mine property
(d) Capitalised works in progress – at cost
Total property, plant & equipment
- at cost or valuation
Less accumulated depreciation/amortisation
Net book value
Stores
Total mine assets
Less impairment loss
Net book value
Reconciliation of Movement in Net Book Value
Net Book Value at beginning of year
Additions
Disposals
Net Book Value at end of year
The basis of valuation of these assets is set out in Note 1(b) of the accounts and attention is drawn to Note 1(a) titled “Basis of Preparation”.
Due to the loss of complete historical information following the suspension of mining operations it is not possible to reliably estimate the carrying
amount that would have been included had mine assets been carried at original cost less accumulated depreciation.
9. Asset Revaluation Reserve
Asset revaluation reserve
31,276
31,276
In 1980 mine assets were revalued by K300 million. A majority of the reserve created by this revaluation was distributed
to shareholders by way of bonus shares leaving a residual amount as shown in this note that has been carried forward.
22
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Bougainville Copper Limited year ended 31 December 2008
2008
K’000
2007
K’000
68
61
12,991
4,405
17,525
86
66
12,991
4,405
17,548
7,136
(3,227)
3,909
7,136
(3,227)
3,909
10. Other Receivables
(a) Current
Sundry receivables
Interest receivable
Monies paid to the Supreme Court
Withholding tax receivable
(b) Non-current
Other receivables
Provision for doubtful debts
Receivables that have been carried forward since the suspension of mining operations have been classified as non-current assets, as the directors consider they
are unlikely to be settled within the following year. A significant proportion of these other receivables are receivable from State owned entities, and are
considered subject to offset on settlement against amounts owing to the State owned entities included in other payables (Note 6(b)). Long outstanding
receivables that are no longer considered collectable have been written off.
The PNG Internal Revenue Commission (IRC) has disallowed BCL’s claimed tax depreciation on its Bougainville Assets on the ground that BCL lost/surrendered
control of its assets in 1990, and therefore the assets should have been totally depreciated in that year and that the availability of depreciation to offset against
BCL’s investment income has lapsed through the passage of time. The IRC has issued assessments on that basis. BCL’s objections to the assessments were
rejected by the IRC and BCL has appealed to the National Court. A hearing date is yet to be set. Our advisors and senior Australian counsel have advised there
are good arguments in support of BCL on this matter and have a better than average chance of succeeding against the IRC. The IRC issued garnishee notices
under the Income Tax Act to all the PNG banks requiring them to pay any funds held by them for BCL to the IRC. BCL obtained an injunction preventing the
execution of the garnishee but this injunction has since been dismissed. BCL appealed the dismissal of the injunction to the Supreme Court. The Supreme
Court heard the appeal, and handed down its decision on the 2nd February 2007, and ordered that the funds being held by the court be paid to the IRC. The
company believes that its position is supportable and the amounts paid are recoverable (refer also Note 14). Meanwhile the substantive appeal against the tax
assessment is pending. In the event the IRC is successful, the impact would be a write off of monies paid to date to the IRC and a recognition of any other
liability arising from the Court’s decision.
11. Ordinary Shares
The issued capital of the company is 401,062,500 ordinary shares fully paid. No change in issued capital occurred
during 2008.
2008
2007
K’000
K’000
Fair value reserve
(19,127)
86,859
This reserve records movements for available-for-sale financial assets to fair value. Refer Note 1(b)(i) and Note
19(g) for calculations of ‘fair value’.
12. Fair Value Reserve
13. Remuneration of Directors
Directors’ remuneration, including the value of benefits, received during the year is as follows:
293
B R Alexander***
R S Burns**
72
J E Leahy
85
D H McLellan****
P R Taylor*
1,565
I J Williams
54
2,069
88
75
81
222
872
1,358
Mr Taylor is the Managing Director and is employed by the Rio Tinto Group which pays his salary and
entitlements. A portion of the benefits are re-charged under the Management Services Agreement. The amount indicated in the above table is the
proportion of the remuneration benefits which have been re-charged to the company.
Amount paid directly to Rio Tinto. See Note 18.
**
*** Mr Alexander retired on 8th May 2008. He was paid K31,323 in Directors Fees and K261,391 in retirement benefits during this reporting period.
**** Mr McLellan retired on 9th May 2007. He was paid K30,046 in Directors Fees and K212,107 in retirement benefits during the 2007 reporting period.
*
23
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Bougainville Copper Limited year ended 31 December 2008
14. Contingent liabilities and assets
Bougainville Copper Limited is defendant to an action commenced in the National Court by two plaintiffs seeking
declarations that they are the lawful representatives of the mine site and the tailings disposal area landowners and that the
Mining Warden is the proper judicial officer to determine what, if any, compensation is due to landowners for the period
since the suspension of mining operations. The company has made a provision in its accounts to cover an award of
landowner compensation.
The Internal Revenue Commission conducted an audit over several months as reported in 2003’s annual report. The audit
covered the period from 1990 to 2002 inclusive. The Internal Revenue Commission has issued amended assessments
claiming additional tax of K15.8 million and penalties of K26.7 million arising out of the audit. BCL’s tax returns for those
and all other years were prepared on BCL’s considered view of the appropriate tax law. BCL believes its view of the law is
correct and accordingly no provision has been recognised for these amounts (refer Note 10). The company has received
expert advice on the matter including that of senior Australian legal counsel. The company has lodged formal objections
and will strenuously defend the claim.
The directors do not expect the company to suffer any material loss as a result of the cancellation of purchase orders for
either revenue or capital contracts.
15. Mining Tenements
The company holds 100 per cent interest in leases: 1, B9, B6, B8, B7, B2, B10, B3; and prospecting authorities: 1, 2, 3, 4, 5,
6, 7A and 7B on Bougainville Island.
16. Holding company
The holding company is Rio Tinto Limited (incorporated in Australia).
17. Segmental Information
The company carried on investment activities during the year. Its assets are the Panguna mine and associated facilities on
Bougainville Island, Papua New Guinea, cash and equities listed on the Australian Securities Exchange.
18. Related Party Transactions
Transactions with directors are disclosed in Note 13.
In 2008 the company paid fees of K1,693,957 (2007 K1,918,006 ) for the provision of office space, staff and related services
to Rio Tinto Minerals (PNG) Limited and K3,241,998 (2007 K146,246) for the Panguna restart studies, mine planning data
conversion, order of magnitude studies and Directors fees for Mr. R Burns to Rio Tinto Technology and Innovation.
The following amounts remained outstanding and payable at the balance date:
Rio Tinto Minerals (PNG) Limited
Rio Tinto Technology and Innovation
Total
2008
K’000
2007
K’000
201
111
312
268
268
With the exception of the above the company did not enter into any other transactions with related parties.
24
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Bougainville Copper Limited year ended 31 December 2008
19. Financial Instruments
The company’s financial instruments include cash and cash equivalents, equity investments, receivables and accounts
payable.
The company uses different methods to measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of foreign exchange, price and interest rate risks in respect of investment portfolios to
determine market risk.
The company holds the following financial assets:
Available-for-sale financial assets
Held-to-maturity financial assets
Total
2008
K’000
2007
K’000
98,753
8,704
107,457
204,739
14,291
219,030
(a)
Financial risk management
The company’s activities expose it to a variety of financial risks, including the effects of changes in market prices,
foreign currency exchange rates and interest rates. The company monitors these financial risks and seeks to
minimize the potential adverse effects on the financial performance of the company. The company does not use
any derivative financial instruments to hedge these exposures.
(b)
Foreign exchange risk
The company undertakes transactions denominated in foreign currencies from time to time and resulting from
these activities, exposures in foreign currencies arise. It is not the company’s policy to hedge these foreign currency
risks. Details of exchange fluctuations and foreign currency amounts are shown in Note 5.
With all other variables held constant, the Company’s exposure to this risk is measured by sensitivity analysis,
as follows:
Held-to-maturity financial assets
K’000
Carrying amount at the balance date
8,704
Change in carrying amount of ‘held-to-maturity financial assets’ and loss for the year:
Had PNG Kina weakened by 10% against the Australian dollar:
Increase in carrying amount and decrease in loss for the year by:
967
Had PNG Kina appreciated by 10% against the Australian dollar:
Decrease in carrying amount and increase in loss for the year by:
(791)
Available-for-sale financial assets
Carrying amount at the balance date
98,753
Change in carrying amount of ‘available-for-sale financial assets’ and fair value reserve:
Had PNG Kina weakened by 10% against the Australian dollar:
Increase in carrying amount and fair value reserve by:
10,973
Had PNG Kina appreciated by 10% against the Australian dollar:
Decrease in carrying amount and fair value reserve by:
(8,978)
25
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Bougainville Copper Limited year ended 31 December 2008
(c)
Price Risk
A large amount of the Company’s assets are held in shares of “Listed Investment Company’s”
(see Note 3) listed on the Australian Securities Exchange. The value of these shares is subject to market
conditions and the fluctuation in AUD / PGK exchange rate.
With all other variables held constant, the Company’s exposure to this risk is measured by sensitivity analysis,
as follows:
Available-for-sale financial assets
K’000
Carrying amount at the balance date
98,753
Change in carrying amount of ‘available-for-sale financial assets’ and fair value reserve:
(d)
Had the share price increased by 10%:
Increased in carrying amount and fair value reserve by:
9,875
Had the share price decreased by 10%:
Decrease in carrying amount and fair value reserve by:
(9,875)
Interest rate risk
The Company holds ‘Held-to-maturity financial assets’ at variable rates, which expose the Company to cash flow
interest rate risk. It is not the Company’s policy to hedge these interest rate risks.
With all other variables held constant, the Company’s exposure to this risk is measured by sensitivity analysis,
as follows:
Held-to-maturity financial assets
K’000
Carrying amount at the balance date
8,704
Change in carrying amount of ‘held-to-maturity financial assets’ and loss for the year:
Had the share price increased by 10%:
Increase in carrying amount and decrease in loss for the year by:
Had the interest rate decreased by 10%:
Decrease in carrying amount and increase in loss for year by:
66
(72)
(e)
Credit risk
The company has no significant concentrations of net credit risk.
(f)
Liquidity risk
The company aims to prudently manage liquidity risk by maintaining sufficient cash and other liquid
assets or the availability of funding through uncommitted credit facilities.
(g)
Fair value estimation
The company is not in a position to determine the fair values of its receivables and payables due to
the significant uncertainties arising from the suspension of mining operations. The face value of bank
balances and short term liquid investments are assumed to approximate their fair values. Equity
investments are carried at their fair value, being market price.
26
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Independent Audit Report
Independent Audit Report to the Members of Bougainville Copper Limited
Report on the financial statements
We have audited the accompanying financial
statements of Bougainville Copper Limited which
comprise the balance sheet as at 31 December 2008
and the income statement, statement of changes in
equity and cash flow statement for the year then ended
and a summary of significant accounting policies and
other explanatory notes.
sufficient and appropriate to provide a basis for our
audit opinion.
Basis for disclaimer of Auditor’s opinion
The financial report of Bougainville Copper Limited for
the year ended 31 December 2008 has been prepared
with the inclusion of the Company's mine assets at
their 1 January 1991 book value, with a separate
general impairment loss provision of K350 million
having been made in 1991 for the value of the
indeterminate level of deterioration, damage and
pilferage of assets which has occurred in the period
since the withdrawal of company personnel from
Bougainville in 1990. As explained in note 1(b) to the
accounts, there continues to be considerable
uncertainty surrounding the future of the Panguna
mine, and the extent of deterioration, damage and
pilferage of the Company’s assets on Bougainville.
While the directors have made this impairment
provision in good faith based on the limited information
available to them, it must be recognised that the actual
extent of the necessary write-downs can only be
established when access to the mine site by appropriate
Company representatives is again possible or when a
reliable market price for the Panguna assets can be
determined.
Directors’ responsibility for the financial
statements
The directors are responsible for the preparation and
fair presentation of these financial statements in
accordance with International Financial Reporting
Standards, other generally accepted accounting practice
in Papua New Guinea and with the requirements of the
Papua New Guinea Companies Act 1997. This
responsibility includes designing, implementing and
maintaining internal control relevant to the preparation
and fair presentation of financial statements that are
free from material misstatement, whether due to fraud
or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are
reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted
our audit in accordance with International Standards on
Auditing. Those Standards require that we comply with
ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the financial
statements are free from material misstatement.
In our opinion, providing for the probable impairment
loss from deterioration, damage or pilferage is the
appropriate accounting treatment for the actual
impairment which will have occurred in the period to
31 December 2008. However, as the actual extent of
such impairment can only be established after the
Company regains access to the mine site or a reliable
market price can be determined, we recognise that, at
present, the recoverable amount of the company’s
assets on Bougainville is not capable of reliable
measurement or estimation. Accordingly the
impairment provision made by directors in 1991 may
eventually prove to be above or below the sum which is
necessary to reflect this impairment. In the absence of
all the necessary information and explanations we
require, and for the reasons set out above, we are
unable to form an opinion as to whether or not the
impairment provision against the carrying amount of
mine assets of K350 million is adequate or not.
Accordingly we are unable to form an opinion as to
whether or not the carrying value of the mine assets, as
disclosed in these accounts, is properly stated.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the
financial statements. The procedures selected depend
on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial
statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair
presentation of the financial statements in order to
design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the
appropriateness of accounting policies used and the
reasonableness of accounting estimates made by
management and the directors, as well as evaluating
the overall presentation of the financial statements.
The directors have established a provision of K22.1
million for compensation, rehabilitation and stabilisation
for which the company may be liable. The Company’s
We believe that the audit evidence we have obtained is
27
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Independent Audit Report
Independent Audit Report to the Members of Bougainville Copper Limited
Report on the financial statements
iii) in conducting our audit we followed applicable
independence requirements of CPA Papua
New Guinea.
actual liability for these costs is subject to significant
uncertainty, and we are unable to form an opinion as to
whether the provision is fairly stated.
PricewaterhouseCoopers
By: J C Seeto, Partner
Registered under the Accountants Act 1996
Port Moresby
The mine assets, which represent 60 per cent of the
book value of total assets and 67 per cent of the book
value of net tangible assets, and the liability for
compensation, rehabilitation and stabilisation, are of
fundamental importance to the presentation of the
accounts. In view of these matters over the carrying
amount of the mine assets and the liability for
compensation, rehabilitation and stabilisation as set out
above, we are unable to form an opinion as to whether
or not the financial report gives a true and fair view of
the financial position of the Company as at 31
December 2008 and its performance for the year ended
on that date.
5 March 2009
Directors’ declaration
Directors' declaration Bougainville Copper Limited
31 December 2008
In the directors’ opinion:
(a) the financial statements and notes set out on pages
14 to 26 are in accordance with the PNG Companies
Act 1997, including:
Disclaimer of auditor’s opinion
Because of the existence of the limitation in the scope
of our work and significance of the matters described in
the paragraphs above:
(i) complying with Accounting Standards, the
Companies Act 1997 and other mandatory
professional reporting requirements; and
(a) we have not obtained all the information and
explanations that we have required, and
(ii) giving a true and fair view of the company’s and
consolidated entity's financial position as at
31 December 2008 and of its performance, as
represented by the results of its operations and its
cash flows, for the financial year ended on that
date; and
(b) we are unable to, and do not express, an opinion as
to whether the financial report of Bougainville
Copper Limited:
(i) gives a true and fair view of the financial
position of Bougainville Copper Limited as at
31 December 2008 and its performance for the
year then ended; and
(b) there are reasonable grounds to believe that the
company will be able to pay its debts as and when
they become due and payable; and
(ii) is presented in accordance with the Companies
Act 1997, International Financial Reporting
Standards and other generally accepted
accounting practice in Papua New Guinea.
This declaration is made in accordance with a resolution
of the directors.
This opinion must be read in conjunction with the
qualification paragraphs above and the rest of our audit
report.
Director: Peter Taylor
Report on other legal and regulatory requirements
The Papua New Guinea Companies Act 1997 requires
that in carrying out our audit we consider and report to
you on the following matters. We confirm that:
Director: Robert Burns
i) in our opinion proper accounting records have been
kept by the company, so far as appears from our
examination of those records;
Director: John Leahy
ii) with the exception of the matters described above
we have obtained all the information and
explanations we have required; and
Director: Ian Williams
Signed on this 5th day of March 2009.
28
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Corporate Information
Bougainville Copper Limited
Twenty largest shareholders
(Incorporated in Papua New Guinea)
The twenty largest shareholders as at 5th March 2009
and the number of shares held by each were:
Name and Registered Address
% of
Issued
Shares Shares
1 Rio Tinto Limited
Melbourne VIC
214,887,966
53.58
2 The Independent State of
Papua New Guinea
76,430,809
19.06
3 ANZ Nominees Limited
Melbourne VIC
33,930,396
8.46
4 Citicorp Nominees Pty Limited
Melbourne VIC
30,789,110
7.68
5 National Nominees Limited
Melbourne VIC
8,566,158
2.17
6 HSBC Custody Nominees
(Australia) Limited
Sydney NSW
7,615,824
1.90
7 J P Morgan Nominees Australia
Limited Sydney NSW
2,028,338
0.51
8 Franz Heinrich Rast
Bulli NSW
1,700,000
0.42
9 Estate Late James West
0.37
Auckland New Zealand
1,495,011
10 Merrill Lynch (Australia) Nominees
Pty Limited Sydney NSW
1,078,531
0.27
11 Bell Potter Nominees Pty Limited
900,000
0.22
Melbourne VIC
12 The Noble Hope for Construction Pty Ltd
Condell Park NSW
700,000
0.17
13 Deep Investments Pty Limited
0.16
629,343
Pymble NSW
14 Mr Anthony Patrick Cahill
Ascot Vale VIC
453,230
0.11
15 Deep Valley Pty Limited
Virginia QLD
377,000
0.09
16 Mrs Francis Claire Fox – Thomas J Beresford
Will A/C. Burwood VIC
321,765
0.08
17 Mrs Sumithra Rambukwella Ranaweera
Colombo, Sri Lanka
312,500
0.08
18 Customer Company INC
London United Kingdom
281,968
0.07
19 Mr Lewis Haswell Finey
0.06
240,446
Fairy Meadow NSW
20 Mrs Patricia Anne Allen
Greystanes NSW
200,000
0.05
Registered Office:
6th Floor, Pacific Place,
Cnr Champion Parade & Musgrave Street,
Port Moresby, Papua New Guinea
Telephone: +(675) 3092800
Facsimile: +(675) 3213634
E-mail:
[email protected]
Website: www.bougainvillecopper.com.pg
Principal Registered Office in Australia:
Bougainville Copper Limited
A.R.B.N. 007 497 869
Level 33, 120 Collins Street, Melbourne, VIC 3000
Telephone: +(613) 92833333
Facsimile: +(613) 92833707
Share Registers:
c/o Kina Securities Limited
2nd Floor, Deloitte Tower, Douglas Street
Port Moresby
Papua New Guinea
Telephone: +(675) 308 7000
Facsimile: +(675) 308 7001
E-mail: [email protected]
Postal address: P O Box 1141 Port Moresby,
Papua New Guinea
c/o Computershare Registry Services Pty Ltd
Yarra Falls
452 Johnston Street
Abbotsford, VIC 3067 Australia.
Telephone: 1300 805 0505 (in Australia)
+(613) 9415 4000 (outside Australia)
Facsimile: +(613) 9743 2500
Postal Address: GPO Box 2975
Melbourne, VIC 3001
E-mail: [email protected]
Website: www.computershare.com
Stock Exchanges:
Listed with the Australian Securities Exchange Limited
Auditors:
PricewaterhouseCoopers
P O Box 484
Port Moresby, Papua New Guinea
Bankers:
Commonwealth Bank of Australia
Bank South Pacific
Solicitors:
Allens Arthur Robinson
Gadens Lawyers
382,938,395
29
95.48
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Corporate Information
Distribution of shares
Applicable Jurisdiction
As at 5th March 2009: The issued shares of the
company were 401,062,500 fully paid one kina shares,
each carrying one voting right. The number of
shareholders was 15,495.
The company is incorporated in Papua New Guinea and
is not generally subject to Australian Corporations Law
including, in particular, Chapter 6 of the Australian
Corporation Law dealing with the acquisition of shares
(including substantial shareholdings and take-overs), but
is instead subject to the provisions of the Papua New
Guinea Companies Act 1997 and Securities Act 1998.
The distribution of holdings of the issued shares was:
1
- 1,000 shares
1,001 - 5,000 shares
5,001 -10,000 shares
10,001 - shares and over
13,103
1,752
342
298
______
%
84.56
11.31
2.21
1.92
______
Total Shareholders
15,495
______
100.00
______
There were 12,044 holdings of shares (77.73 per cent)
which do not form a marketable parcel.
95.48 per cent of the total issued shares were held by
or on behalf of the twenty largest shareholders.
The substantial shareholders were:
Rio Tinto Limited and its wholly-owned subsidiary Rio
Tinto Base Metals Pty Limited 214,887,966 shares
(53.58 per cent); Rio Tinto plc has an interest in the
same shares through its wholly-owned subsidiaries’
(Tinto Holdings Australia Pty Limited, Melbourne, Vic.,
Rio Tinto Australian Holdings Limited, Rio Tinto Pacific
Holdings Limited and Rio Tinto International Holdings
Limited, all of London, UK) interests in Rio Tinto Limited
and Rio Tinto Base Metals Pty Limited; The Independent
State of Papua New Guinea 76,430,809 shares (19.06
per cent).
30
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Distribution of the Benefits
Bougainville Copper Limited year ended 31 December 2008
2008
K million
1972-2008
-
514.2
72.6
122.2
104.1
10.1
167.4
97.6
1,088.2
-
61.4
1.8
12.0
75.2
-
3.2
35.0
38.2
-
582.1
-
575.6
2,359.3
PNG Government
Corporate income tax*
Additional profits tax*
Group tax (PAYE)
Customs duty
Miscellaneous
Dividends*
Dividend WHT*
North Solomons Provincial Government
Royalties (95% to NSPG)
Non Renewable Resources Fund
Other taxes
Landowners
Royalties (5% to Landowners)
Compensation
Non-Government Shareholders
Dividends net of Dividend WHT*
Employees
Wages (less PAYE)
Total
Not included in the above table are the benefits received by the providers of goods and services to Bougainville Copper Limited. A company survey
in 1989 revealed that there were approximately 200 Bougainville based business enterprises dependent largely upon Bougainville Copper Limited's
operation. These enterprises employed in excess of 4,000 people prior to the suspension of mining operations.
*These amounts relate to the referable year (i.e. the year in which the amount became due) and hence the cash effect on the PNG economy has a
delayed impact.
31
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
Statistical Summary
FINANCIAL
Earnings (K million)
Net sales revenue and other income*****
Operating and other expenses****
Depreciation*****
Earnings/(loss) before taxation and exchange gains
Exchange gains/(losses)
Earnings/(loss) before taxation
Income tax
Additional profits tax
Net earnings/(loss)
Dividends paid
Earnings/(losses) retained
2006
2004
2003
2002
2001
2000
1999
1998 1997 1996 1995 1994 1993
1992
8.3
4.9
3.4
0.2
3.6
3.6
3.6
7.9
4.4
3.5
0.2
3.7
3.7
3.7
7.4
5.0
2.4
(0.4)
2.0
2.0
2.0
16.1
4.7
11.4
3.1
14.5
14.5
14.5
11.7
4.1
7.6
0.3
7.9
7.9
8.0
(0.1)
13.0
4.6
8.4
8.4
8.4
8.4
19.6
3.8
15.8
15.8
15.8
15.8
18.3
4.8
13.5
0.4
13.9
13.9
13.9
12.4
5.2
7.2
0.5
7.7
7.7
7.7
6.1
4.8
1.4
1.4
1.4
1.4
10.7
5.0
5.7
5.7
5.7
5.7
5.5
4.9
0.6
6.6
7.2
7.2
7.2
2.2
3.6
(1.4)
9.2
7.8
7.8
7.8
1.7
4.1
(2.4)
(0.3)
(2.7)
(2.7)
(2.7)
2.2
5.1
(2.9)
1.5
(1.4)
(1.4)
(1.4)
197.9
98.8
31.1
327.8
293.3
33.4
1.1
327.8
197.9
204.7
36.1
438.7
404.0
33.6
1.1
438.7
197.9
176.6
38.7
413.2
378.2
33.7
1.3
413.2
197.9
128.2
31.7
357.8
323.3
33.4
1.1
357.8
197.9
121.2
31.4
350.5
316.1
33.4
1.0
350.5
197.9
18.9
119.4
336.2
301.6
33.4
1.2
336.2
197.9
3.1
135.4
336.4
301.8
33.4
1.2
336.4
197.9
131.0
328.9
293.3
33.4
2.2
328.9
197.9
114.4
312.3
277.5
33.5
1.3
312.3
198.6
100.7
299.3
263.6
35.3
0.4
299.3
200.1
87.7
287.8
255.9
6.8
25.1
287.8
200.6
85.4
286.0
254.5
6.8
24.7
286.0
200.7
76.0
276.7
248.8
6.8
21.1
276.7
200.7
65.6
266.3
241.6
6.8
17.9
266.3
200.8
56.2
257.0
233.8
6.8
16.4
257.0
201.4
56.8
258.2
236.4
6.8
15.0
258.2
(millions of tonnes)
(millions of tonnes)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(per cent)
(grams/tonne)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(thousands of dry tonnes)
(thousands of dry tonnes)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(per cent)
(grams/tonne)
(grams/tonne)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(thousands of dry tonnes)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(per cent)
(per cent)
(per cent)
(per cent)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.3344
0.33
0.30
0.25
0.26
0.36
0.39
0.48
0.69
0.76
0.79
1.01
1.02
1.04
Balance Sheet (K million)
Property, plant & equipment
Investments and loans
Current and other non-current assets
Total assets
Shareholders’ funds
Exchange fluctuation
Long term liabilities
Current liabilities
Funds employed
PRODUCTION / SALES
Mined
Ore and waste removed
Ore milled
Ore grade
Copper
Gold
Produced
Concentrate
Contained copper
Concentrate grade
Copper
Gold
Silver
Shipped
Total concentrate
Destination:
Japan
Other Asian
Europe
All Other
Values
Gross concentrate sales value (before treatment
and refining charges, freight, etc.)
(K million)
Contribution by:
Copper
(per cent)
Gold
(per cent)
2008 2007
9.0
9.2
(0.2)
(4.6)
(4.8)
(4.8)
(4.8)
OTHER
US$/Kina exchange rate
.3747 0.3636
Average metal prices
LME copper
(USc/lb) 319.5 323.66
London gold market
(US$/oz) 872 691.00
Return on shareholders’ funds
(per cent) (1.632) 0.888
Earnings per share***
(toea) (1.19) 0.895
Dividends per fully paid share***(par value K1.00) (toea)
Number of shares issued at end of year (millions) 401 401
Number of shareholders at end of year
15,495 15,504
Debt/equity ratio
Workforce at end of year
Overseas
National
-
-
305.50 130.01 79.95 70.65
66.2
82.1
71.4
75.2 105.6 104.0 133.1 105.0 87.0 103.0
602.00 409.55 363.89 310.14 276.5 280.0 280.0 294.0 335.3 387.0 384.5 384.0 360.0 344.0
0.967
0.60
4.6
2.6
2.8
5.4
5.0
2.9
0.5
2.2
2.9
3.2
0.912
0.50
3.61
1.96
2.10
3.93
3.5
1.9
0.3
1.4
1.8
1.9
2
401
401
401
401
401
401
401
401 401 401 401 401 401
401
15 698 16 072 16 374 16 519 16 812 17 021 17 260 18 183 18 182 18 041 18 452 18 765 19 189 19 851
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes: Bonus dividends of 4.0 and 6.7 toea per fully paid share were made in 1979 and 1980 respectively and have been included in dividend figures
for those years. *Full year figures: but commercial production commenced 1 April, 1972. **1972 figure is for Bougainville Mining Limited.
32
1
1
BOUGAINVILLE COPPER LIMITED ANNUAL REPORT
1991
1990
1989
1988
1987
1986
3.3
80.2 231.6
36.8 181.7
316.6
51.5
47.3
(313.3) (8.1)
2.6
0.1
(0.5)
2.5
(313.2) (8.6)
5.1
6.0
25.7
(313.2) (14.6) (20.6)
(313.2) (14.6) (20.6)
493.4
244.8
43.9
204.7
(2.9)
201.8
70.0
23.2
108.6
108.3
0.3
415.4 342.7
227.5 223.7
49.4
47.3
138.5
71.7
2.6
2.3
141.1
74.0
50.6
28.7
90.5
45.3
92.2
44.1
(1.7)
1.2
201.5
56.5
258.0
237.9
6.8
13.3
258.0
1985
1984
1983
1982
1981
1980
1979
317.6 310.9
221.5 234.8
47.6
46.5
48.5
29.6
(1.4)
(2.8)
47.1
26.8
19.0
15.2
28.1
11.6
28.1
16.0
(4.4)
392.9 283.2 296.4
228.1 207.2 210.8
47.0
44.2
43.3
117.8
31.8
42.3
(16.3)
(3.3)
1.1
101.5
28.5
43.4
46.9
17.3
20.6
54.6
11.2
22.8
52.1
10.0
20.1
2.5
1.2
2.7
338.7
174.8
43.8
120.1
2.6
122.7
39.6
11.6
71.5
80.2
(8.7)
1978
1977
1976
1975
1974
1973
1972*
343.1 225.1
144.1 125.0
40.7
40.4
158.3
59.7
3.5
10.3
161.8
70.0
57.5
22.0
20.4
83.9
48.0
106.9
40.1
(23.0)
7.9
205.3 208.9
126.8 117.5
36.2
31.1
42.3
60.3
(0.1)
1.3
42.2
61.6
13.7
20.3
28.5
41.3
21.4
26.7
7.1
14.6
193.1
107.2
29.6
56.3
2.3
58.6
12.4
46.2
26.7
19.5
292.6
92.5
28.5
171.6
9.5
181.1
49.1
17.4
114.6
73.5
41.1
252.4
81.8
24.8
145.8
12.9
158.7
0.3
158.4
81.4
77.0
95.9
53.3
14.5
28.1
(0.4)
27.7
27.7
11.0
16.7
545.9
64.7
610.6
551.1
47.7
11.8
610.6
595.8
59.5
655.3
565.6
46.9
42.8
655.3
570.0
2.2
250.1
822.3
586.2
0.2
23.7
212.2
822.3
527.8
0.7
260.3
788.8
586.0
0.3
24.8
177.7
788.8
550.1
0.7
190.1
740.9
587.7
(3.2)
48.1
108.3
740.9
558.5
0.2
160.4
719.1
586.5
(5.9)
52.4
86.1
719.1
576.2
0.2
152.9
729.3
586.5
(5.3)
52.5
95.6
729.3
594.9
0.3
185.3
780.5
590.9
(4.7)
51.6
142.7
780.5
622.8
0.1
155.9
778.8
588.4
(5.4)
125.6
70.2
778.8
611.2
0.1
148.7
760.0
587.2
1.5
80.1
91.2
760.0
610.8
0.1
148.4
759.3
584.5
5.1
25.7
144.0
759.3
325.4
0.1
201.0
526.5
294.5
5.4
36.2
190.4
526.5
340.1
0.1
125.8
466.0
317.5
9.0
42.1
97.4
466.0
352.2
0.1
137.1
489.4
309.7
14.6
53.3
111.8
489.4
350.4
0.1
136.0
486.5
302.5
9.0
101.7
73.3
486.5
346.0
0.1
129.5
475.6
287.9
11.5
106.8
69.4
475.6
352.2
0.1
205.6
557.9
268.4
19.1
121.1
149.3
557.9
371.7
0.1
130.4
502.2
227.4
39.5
127.5
107.8
502.2
378.7
73.9
452.6
146.7
24.2
204.0
77.7
452.6
-
-
33.27
18.52
89.78
47.69
83.53
48.20
79.16
47.89
73.62
50.07
74.40
46.52
81.00
47.73
76.22
41.74
77.56
37.53
79.76
37.62
75.97
36.17
79.05
38.12
70.79
34.11
58.54
31.21
56.40
31.08
56.00
30.14
56.65
29.14
46.75
21.89
-
-
0.44
0.50
0.41
0.41
0.41
0.43
0.42
0.48
0.42
0.42
0.42
0.48
0.46
0.55
0.47
0.60
0.51
0.59
0.46
0.50
0.55
0.75
0.60
0.82
0.61
0.90
0.64
0.87
0.64
0.80
0.70
1.02
0.73
1.03
0.76
0.77
-
-
224.6
68.7
552.0
166.0
585.5
178.2
586.6
178.6
581.8
175.0
542.3
164.4
636.9
183.2
598.6
170.0
576.4
165.4
510.4
146.8
584.7
170.8
658.6
198.6
615.6
182.3
596.8
176.5
596.0
172.5
640.8
184.1
650.2
182.9
438.1
124.0
-
-
30.1
31.0
91.2
30.1
25.1
87.7
30.4
25.8
86.4
30.5
27.9
85.9
30.1
24.7
79.3
30.3
28.9
81.9
28.8
28.3
74.4
28.4
29.3
72.1
28.7
29.2
73.5
28.8
27.5
72.2
29.2
33.7
76.3
30.2
35.5
79.8
29.6
36.3
77.0
29.6
33.9
76.1
28.9
30.5
71.0
28.7
32.0
72.3
28.1
31.6
69.0
28.3
27.3
69.3
-
-
250.8
570.8
567.6
589.4
560.0
550.8
636.1
599.6
596.2
494.4
586.5
640.9
614.8
605.8
587.0
665.8
625.2
434.4
-
-
40.2
34.3
25.5
0.0
45.4
23.4
27.7
3.5
32.6
33.5
33.9
0.0
43.2
15.4
41.4
0.0
44.1
15.7
40.2
0.0
51.9
12.3
35.8
0.0
47.0
11.0
42.0
0.0
46.6
6.6
45.1
1.7
49.8
3.3
45.4
1.5
54.5
4.1
41.4
0.0
56.0
3.7
40.3
0.0
51.0
3.2
42.0
3.8
54.8
1.6
39.9
3.7
42.3
1.7
46.5
9.5
42.7
1.7
53.8
1.8
51.5
0.0
41.9
6.6
54.8
0.0
37.8
7.4
48.1
0.0
49.4
2.5
0.3
260.0
561.0
489.4
417.9
381.3
373.4
454.6
343.6
355.2
386.3
407.0
294.5
266.3
260.3
219.4
307.4
270.8
118.8
61
38
68
31
68
30
60
38
54
44
61
37
53
45
52
46
51
47
54
44
51
46
60
37
64
`34
66
32
74
24
69
29
74
25
83
16
83
16
1.05
1.17
1.16
1.10
1.03
1.00
1.11
1.19
1.35
1.48
1.50
1.41
1.42
1.27
1.26
1.31
1.43
1.42
1.19
1.05
106.0 119.8 129.0 117.9
81.0
62.3
64.3
62.4
71.9
67.1
79.0
99.2
89.8
61.9
59.3
63.6
55.9
93.3
80.9
48.6
362.2 382.8 381.0 436.8 446.7 367.9 317.3 360.8 423.5 375.6 459.9 614.7 304.7 193.5 147.8 124.8 160.9 158.7
97.3
58.2
18.5
15.4
7.7
4.8
2.0
9.3
1.9
3.9
12.2
28.5
15.1
9.2
13.7
16.0
42.7
69.7
18.9
27.1
22.6
11.3
7.0
2.9
13.6
2.8
5.7
17.8
20.9
12.0
7.1
10.3
11.5
28.6
39.5
6.9
27.0
23.0
11.0
7.0
4.0
13.0
2.5
5.0
20.0
26.7
10.0
5.3
6.7
6.7
18.3
20.0
2.7
401
401
401
401
401
401
401
401
401
401
401
401
267
267
267
267
267
267
267
260**
19 982 20 532 21 287 21 966 22 650 24 680 27 117 30 435 32 834 36 486 38 027 38 326 38 750 40 935 43 820 50 082 54 129 55 558 45 353 46 726
- .002/1 .004/1 0.05/1 0.06/1 0.09/1 0.10/1 0.20/1 0.17/1 0.05/1 0.15/1 0.19/1 0.37/1 0.40/1 0.44/1 0.52/1 0.72/1 0.62/1
6
6
13
10
330
1 987
610
2 950
699
3 025
706
2 993
704
2 948
749
2 987
751
3 058
756
3 174
801
3 377
877
3 416
851
3 314
855
3 243
853
3 063
858
2 989
942
3 094
980
3 242
929
2 915
***1972 to 1979 figures are after adjustment for the 1980 capital reconstruction
****1989, 1990 and 1991 include extraordinary items of K26.1 million, K28.7 million and K309.2 million respectively
*****1990 includes extraordinary items of K76.3 million for insurance litigation settlement and K51.5 million for depreciation.
33
971
2 594

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